Toro Co Q4 2024 Earnings Call Summary

The following is excerpted from the question-and-answer section of the transcript.

Question: Eric Bosshard - Cleveland Research Company - Analyst : Two things. I guess, first of all, the Residential profit contraction in the quarter was a little different than, I guess, what many 4Qs have looked like. Anything unique or any way you could help us better understand the Residential profit performance in the quarter?

Question: Eric Bosshard - Cleveland Research Company - Analyst : Okay. And then, Rick, I thought it was helpful to hear a lot of tailwinds that you see within the business as we move forward. I guess the question is, 90 days ago, I think the expectation was Pro up 15%, and it was up 10% in the quarter. And I know there was talk of 5% or perhaps a path to 5% growth in '25, and now it's 0 to 1. And so I guess my question is, with the tailwinds certainly intact, like, what's different in terms of the revenue performance in Pro in the quarter and the total outlook in '25? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 18, 2024 / 4:00PM, TTC.N - Q4 2024 Toro Co Earnings Call

Question: Michael Shlisky - D.A. Davidson & Co. - Analyst : Can I get a little more detail on the AMP It Up initiative that you mentioned, Rick? Looking at your slides here, it's got a nice looking logo. I guess I'm curious how it differs from the original AMP program that you've got here, I guess, is it an amped up version of what you're already doing? And a little bit more about what's involved? Does it involved taking more employee suggestions and [word in] for it? Or are there other things we should be thinking about here?

Question: Michael Shlisky - D.A. Davidson & Co. - Analyst : Okay. Fair enough. I also want to ask about your autonomous products that you've mentioned a few times in your comments, Rick. It sounds like it's going to be a bit of a larger launch than maybe previous tests have been, so this is a real retail launch here. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 18, 2024 / 4:00PM, TTC.N - Q4 2024 Toro Co Earnings Call Any thoughts as to what the penetration might be after the first year, maybe secondly, after the 50 -- like, what's the curve you expect to see here given the prior kind of where it delivers? It might differ by the Residential versus the Professional group? Just kind of

Question: Michael Shlisky - D.A. Davidson & Co. - Analyst : Exciting, Rick. Thanks so much for the discussion. I'll hop back in the queue.

Question: David S. MacGregor - Longbow Research - Analyst : I guess I wanted to start on the Residential business and stronger-than-expected growth in the fourth quarter, but first quarter guide is down mid-single digits. Can you just discuss the extent to which fourth quarter programming promotions may have pulled forward unit volume from first half '25?

Question: David S. MacGregor - Longbow Research - Analyst : Right. So I have a follow-up question, but I just want to clarify here. So you're saying that pull forward was not an issue here in terms of strength in 4Q versus the weakness in 1Q?

Question: David S. MacGregor - Longbow Research - Analyst : Okay. And then my follow-up question is just with regard to the 2025 guidance. And you've talked about net sales growth relatively flat, maybe up 1%. But you've got your margins -- adjusted gross margins up and not slightly. I mean there's no word slightly in there. So you feel like though you're setting up for a pretty good incremental performance -- incremental margin performance. And I was wondering if you could just sort of talk about the puts and takes within that incremental margin performance? What is driving that strength in '25?

Question: David S. MacGregor - Longbow Research - Analyst : Great. Do you expect that raw materials will be a good guide next year?

Question: Timothy Wojs - Robert W. Baird & Co. Incorporated - Analyst : Maybe just my first question is maybe just the EPS kind of cadence for the year. So thanks for the Q1 comments. I guess as you think about the rest of the year, I mean, should we expect -- or are you expecting earnings growth on a year-over-year basis for the remaining 3 quarters? Or is the guidance kind of more second half weighted than that? Trying to kind of think about how that -- how we should kind of pace earnings through the year.

Question: Timothy Wojs - Robert W. Baird & Co. Incorporated - Analyst : Okay. And I guess on the backlog, you ended the year at $1.2 billion. You've kind of chewed through a fair amount of that. I mean, what do you kind of imply -- when you say normalized backlog and kind of ending the year at a normalized number, what are you kind of implying for that? And I guess within the $1.2 billion, how much of that today is golf and how much today of that is underground now?

Question: Timothy Wojs - Robert W. Baird & Co. Incorporated - Analyst : Okay. So you don't have like a normal -- like you don't have like a number where you're saying like $700 million or something like that, it's a normal backlog?

Question: Timothy Wojs - Robert W. Baird & Co. Incorporated - Analyst : Okay. That's helpful. And then I guess just -- I mean on this is like mathematically, can you prevent like an air pocket in fiscal '26 in like golf and underground? Just -- I guess if you're shipping backlog, you're kind of technically overshipping demand. So just if you have normal demand next year, I guess, does it like mathematically imply that those businesses are down? Just trying to understand if there's a way to kind of prevent it. I know like landscape probably normalizes, but it just seems like you could have still some kind of volatility in those businesses, too.

Question: Timothy Wojs - Robert W. Baird & Co. Incorporated - Analyst : Okay. I understand. And then if I could squeeze one more, last one in. Just on the upcoming administration, I guess, do you explicitly have anything in the guidance related to tariffs? And then how have you kind of thought about integration? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 18, 2024 / 4:00PM, TTC.N - Q4 2024 Toro Co Earnings Call I know a lot of your products drive productivity, so that could be a positive. But -- is there a risk that some of your customers could actually just have a lower earnings year if they just don't have as much labor to complete the same number of jobs? I guess how have you -- how would you kind of answer that question?

Question: Joshua Wilson - Raymond James & Associates, Inc. - Analyst : Just a point of clarification. First, as it relates to the '25 guidance, when you talk about stable conditions for landscape contractor

Question: Edward Jackson - Northland Capital Markets - Analyst : Thanks very much. Skin and teeth, got it by the Q&A. Good morning. My first question is pretty simple. It's kind of the flip side of the earlier question with regards to working through the backlog and the air pocket. As you normalize your dealer inventory and you -- let's say, you hit your expectation of getting that normalized before you exit this year, wouldn't the flip side being the case that where we could see a pickup in your sales because you're no longer having to deal with that headwind? And that would be something that could be a tailwind for you in 2026 and perhaps even the second half of '25?

Question: Edward Jackson - Northland Capital Markets - Analyst : Yes. Well, we know it's going to snow [in May]. Just pointing that out, at least where we are. You're all aware of that. So second question. You commented in the last call that you were seeing the rental market softened. And I was looking for an update on that. I mean if you listen to the calls during the third quarter for most of the rental houses, they're clearly kind of -- they're not getting the utilization rates they had in the past. The outlooks for them is a little more subdued, pulling back on some of their CapEx. I mean I know it's just one portion of your business and not like the thing that drives everything. But what have you seen with that business as you've gone through the fourth quarter?

Question: Edward Jackson - Northland Capital Markets - Analyst : Okay. I'll leave it too. The Q will be out later today. Is that correct?